Confidence
As fall moves into winter we are seeing more turmoil and a lack of confidence in the leadership of our blue chip financial institutions. Within the past two weeks we have seen the resignations of Stan O’Neal, CEO of Merrill Lynch (MER) and Charles Prince, CEO of Citigroup (C), the world’s largest bank based on assets. They were both brought down by their inability to size their firms’ exposure to the subprime mortgage mess that continues to roil the global financial markets. Whether they were brought down by structured investment vehicles (SIVs) or collateralized debt obligations (CDOs), where they underestimated their exposure, or a lack of confidence in them by their shareholders and finally their boards, both CEOs seemed very distant from the market in which they operated.
The lesson for those of us in the media business is very clear: companies need leaders that know their business and have come up through the ranks. Leaders need to rise from the operating side of the business and understand the markets’ need for transparency. Unfortunately, the trappings of power help many leaders forget that their board represents the shareholders and other stakeholders in the firm and that surprises and failure to deliver on promises can only be tolerated for so long. Sandy Weill’s legacy would have been much better served if JPMorgan Chase’s (JPM) CEO Jamie Dimon, Weill’s original heir apparent, had succeeded him, as opposed to his corporate counsel, Chuck Prince.
During all this turmoil, I was pleased to see that Time Warner’s (TWX) board finally anointed Jeff Bewkes as CEO, effective January 1, 2008. He will take over from Dick Parsons, who will remain chairman. Bewkes developed his game at HBO and clearly is comfortable in a leadership role. He has been quoted in the press as stating that “everything is on the table.” In Unlocking Shareholder Value on July 1st, I called for Time Warner to take a more aggressive approach in spinning out Time Warner Cable and setting free AOL. I believe that shareholders and the markets would react very positively if these were some of Bewkes’ first moves as CEO.
While we wait to see what direction Bewkes takes Time Warner, it will also be interesting to watch over time how Barry Diller’s latest move to create a more highly valued company at InterActiveCorp (IAC), by splitting into five companies, is received by the market and Liberty Media’s John Malone. As a former board member of Ask.com, prior to the sale, I am pleased to see that Diller believes that Ask.com is core to his future.
While the stock markets continue their retreat, one stock stands out, Google (GOOG). As I write this column, Google’s share price is above $740. The run from $600 to $740 has been breathtaking and some pundits are now projecting a price of over $900! Markets reward transparency, confidence and outstanding results driven by above market growth. I trust that Google’s leadership triumvirate will remain in place.
I am off this weekend to Outsell’s Signature Event, co-produced with The Jordan, Edmiston Group, Inc., on Kiawah Island. I am looking forward to a round of golf on the Ocean Course on Sunday, prior to listening to the information industry leaders in the evening. I have been told to pack a significant number of golf balls!